U.S. Stock Indices In Recovery Mode

U.S. stock indices have seen a lot of volatility with significant chop back and forth starting off 2025. With the new year comes a new administration, changing foreign policy, changing of the Fed interest rate environment, and a different earnings outlook for stocks. Looking at the small caps with the Russell 2000, the market has been in a range between the 50-day moving average and the 200-day moving average since the breakdown on December 18th, and has not been able to break on either side of these levels.

After a broad selloff starting off the week for the indices, the Russell has been climbing back higher after re-testing the 200-day moving average. The market has been trading above this 200-day moving average since December of 2023 and will need some type of catalyst to break out of the current range. The Russell, or small cap stocks in general, typically are the most sensitive to interest rate changes, and with the changing tone from the Fed and the probability of rate cuts coming this year, traders will be watching the Russell 2000.

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**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.